The Canadian Airline Industry

Topics: Air Canada, Airline, Regional airline Pages: 5 (1572 words) Published: November 1, 2005
INTRODUCTION
An airline is an organization providing aviation services to passengers and/or cargo. It owns or leases airlines with which to supply these services and may form partnerships or alliances with other airlines for reasons of mutual benefit The scale and scope of airline companies ranges from those with a single airplane carrying mail or cargo, through full-service international airlines operating many hundreds of airplanes in various types. Airline services can be categorized as being intercontinental, intercontinental, regional or domestic and may be operated as scheduled services or charters. Canada's domestic airline industry has evolved from being an Air Canada monopoly to a virtually deregulated industry where the market is open to any carrier who can obtain an operating license and pass a financial fitness test. This environment came about in response to pressure from carriers for less government regulation to allow them to better compete in the domestic marketplace. To this end, the government passed the National Transportation Act in 1987, which brought about the economic deregulation of Canada's domestic airline industry. Air Canada consolidated its position by becoming a privatized corporation in 1988, thereby allowing it to compete without the constraints of being a Crown corporation, including the need for government approval of corporate and financial plans. It also acquired regional airlines, further strengthening its position The Canadian Airline Market

•Air Canada has always been the largest carrier, initially as the publicly owned carrier, with exclusive rights to serve domestic markets, and latterly, since relaxation of entry and pricing restrictions, by success over domestic competitors. With the acquisition of Canadian Airlines International, Air Canada moved from the 18th to the 12th largest passenger airline in the world and the 7th largest in North America. The other major development in the domestic market has been expanded service by medium-sized carriers. West Jet, Western Canada's discount carrier, which began operations in February 1996 and has recently extended its services into Eastern Canada, has been Canada's fastest growing and most financially successful independent carrier.WestJet has made enormous strides over the last few years, increasing to a 14.16% share from 4.26% of the market between 2002 and 1999. Low fare service, including Tango, is booming - 36% in summer 2002 from 16% in 2003. The largest independent is Canada 3000, a 12-year-old airline that has gone from being a charter carrier to a significant provider of low-cost scheduled service. With its recent acquisition of Royal Airlines and CanJet Airlines, Canada 3000 has become a more important player in the domestic industry. Air Transat, Canada's largest charter-type carrier, has been expanding its domestic service as well. Most recently, new entrants have begun service; including Capital City Air, an Edmonton-based carrier, while small regional carriers like Hawkair and Peace Air have expanded their service This expansion has created new options for travellers, but it has not significantly affected Air Canada's position as the dominant carrier. Early in 2003, Air Canada estimated that it had a 90% share of Canadian travel agency sales and a 75% share of seat capacity in the domestic market.6 After Air Canada gained control of CAI, it became the sole carrier on the majority of the top 200 domestic routes. As of August 2000, Air Canada accounted for 80% or more of the capacity on 11 of the top 25 domestic routes and at least 50% of the capacity on 22 of the routes. Niche and fringe carriers serve mainly leisure travelers and some less time-sensitive business travelers in major markets. Air Canada has important competitive advantages in the general business market, where travelers value the airline's flight frequency, seamless service, frequent flyer points and other amenities. Canada 3000 is targeting...

Bibliography: Debra Ward, The Impact of Airline Restructuring in Canada: First Interim Report, February 5, 2001; Bruce Hood, The Report of the Air Travel Complaints Commissioner, Canadian Transportation Agency, March 2001.
Transport Canada output indices are described in Transportation in Canada 1996, Annual Report, pp. 153-167.
Transport Canada, Transportation in Canada 2000, Annual Report, p. 164.
.Tae Hoon Oum, "Key Aspects of Global Strategic Alliances and the Impacts on the Future of Air Canada and Other Canadian Air Carriers", paper prepared for CTAR, March 2001.
Steven A. Morrison and Clifford Winston, "The Remaining Role for Government Policy in the Deregulated Airline Industry", in Deregulation of Network Industries: What 's Next, edited by S. Peltzman and C. Winston, Washington, D.C., AEI-Brookings Joint Center for Regulatory Studies, 2000.
This is discussed in Thomas W. Ross and W.T. Stanbury, "Policy Proposals for Enhancing Competition in Canadian Airline Markets", paper prepared for CTAR, March 2001.
The TCAA is discussed in P.P.C. Haanappel, "International Aviation Framework and Implications for Canadian Policy", paper prepared for CTAR, March 2001.
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